The habits of Empire die hard, as it is writ large

IF YOU think you have freedom of speech, think again. Directors of Empire Oil & Gas fired off legal threats in early January to a group of shareholders they claim had defamed them in an online stock forum.

Among the slew of ultimatums from their Perth lawyer, Martin Bennett, were demands that shareholders who had allegedly libelled Empire's directors apologise, demands that they remove ''offending posts'' from the internet, demands that they pay Bennett's legal bills and, preposterously, demands that they ''make an appropriate offer to compensate for the damages caused to date; [saying that] in Western Australia since 1984 the award for nominal damages is $5000 per publication''.

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Fearful shareholders interpreted this as a demand to pay $5000 per defamatory post. Martin Bennett responded to Fairfax Media that the interpretation that the ''concerns notices'' represented a demand for money were ''rubbish''. ''They legitimately invited settlement of genuine causes of action.''

In any case, if the HotCopper posters did not respond to these ''concerns notices'', they faced a lawsuit in the Supreme Court of Western Australia.

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One distressed shareholder told Fairfax he had to pay hundreds of thousands of dollars. The action, he said, would ruin him and his family.

Another said he faced a marital crisis arising from the stress of the aggressive legal tactics.

''My fear is - even if I'm totally in the clear, the cost of a defence action will be enough to bankrupt me on airfares alone (let alone the lawyer's fees). This is a really scary place to be in for the unfamiliar,'' another said.

''From my perspective, it feels a lot like, basically, 'Pay us $X00,000 and write an apology or we will sue you for even more'. The $X00,000 will bankrupt me and my family anyway, so what to do apart from the unthinkable?''

If you think you have freedom of speech, you're wrong. Empire is merely one example. Shareholders are regularly muzzled by legal threats, gagged from publishing their opinions about company performance and management.

Over the past two years, there has been an alarming rise in the incidence of defamation threats against company shareholders and others.

HotCopper, the leading chat forum where investors exchange views on the sharemarket, is so plagued by legal threats that its managing director is leaving the country.

''I've received legal threats from probably 50 companies in the past couple of years but only been forced to shut down discussion on seven ASX stocks so far,'' managing director Greg D'Arcy says.

''Peninsula Energy was our third most popular stock of all time on HotCopper and, since banning discussion, has caused a dramatic drop in our daily usage. The lawyers are slowly killing our business. Our only option left is to move HotCopper to the USA.''

In the US, freedom of speech is protected under the constitution. In Australia, defamation laws enacted a century before the internet are supposed to protect people's reputations from unfair attack. In reality, they can be exploited to undermine free speech and protect powerful people and corporations from scrutiny.

Such scrutiny is absolutely integral to democracy and, at the same time as this perilous rise in the suppression of information is occurring, mainstream media revenues and staffing levels are under unprecedented pressure.

This means a lot of information which ought to be reaching the public domain is not. This reporter can attest first-hand that a good deal of time is chewed up by journalists and media organisations responding to large numbers of defamation claims. These are mostly funded unwittingly by shareholders and investors.

Shareholders, in other words, are unknowingly paying to have important information about their investments withheld from them. Fairfax asked Empire's lawyer, Martin Bennett, who was funding his legal bills. He declined to answer, although the letter of demand says the claims are being made by the directors in their personal capacities.

He did, however, agree to write a defence of the Empire directors' actions. This will be published online on Monday.

Under reforms a few years ago to the Defamation Act, big companies are no longer allowed to sue for defamation. The logic is that they have the resources to put their own opinions widely in the public domain. But there is nothing to prevent directors from taking action, and the same outcome is often achieved - the gagging of free speech, that is - as if the company itself were suing.

Much of the alleged defamation of Empire directors on HotCopper is questionable. Yes, some posts are clearly defamatory, but much of the commentary reviewed by this reporter seems normal and justifiable criticism. Yet, while Empire's detractors have been muzzled, there has been nothing to shut down the vitriol on other websites written by supporters of the board.

Besides the threats detailed above, directors have already brought defamation proceedings against three of their detractors, Darren Watson, activist Eddie Smith and a retired nurse from Queensland, Suzanne Devereux.

It would seem to be one big waste of court time and taxpayer money.

The current defamation laws are pitifully inadequate to cover the revolution in digital media. When the public now publishes by the second, globally, and it is impossible to shut down adverse commentary in other jurisdictions, it's time for Australia to dump its antiquated defamation laws and adopt a regime in line with the US, where free speech is better protected.

If the present plague of threats continues to escalate, democracy will be all the poorer.